China: Integrating Into The Global Automotive Industry Michael Robinet VP Global Forecasting CSM Worldwide OESA Seminar - Business Opportunities in China March 3, 2003
Presentation Outline Who is CSM Worldwide? China s Evolving Global Position Beyond a Domestic Industry Global Scope is the Key Summary
CSM Worldwide Light Vehicle Sales & Production Forecasts Global NA, Europe, SA, Japan/S. Korea and Emerging Markets Global Integration Powertrain Forecasts NA, Europe, SA, Japan/S. Korea (2003) Component Forecasts NA, Europe, SA, Japan/S. Korea Market Assessment
Forecast Scope Global Coverage & Global Team CSM Offices Detroit Lansing London Brussels Tokyo Frankfurt Sao Paulo CSM Affiliates Prague New Delhi Shanghai Singapore
Presentation Outline Who is CSM Worldwide? China s Evolving Global Position Beyond a Domestic Industry Global Scope is the Key Summary
Global Production Growth in Emerging Markets & C/E Europe Millions 70 60 50.4m 54.7m 63.7m 50 CTG 2002-2008 40 30 20 10 Almost 45% of Global CTG emanates from the Emerging Markets : 55% of which is Chinabased 6% 6% 10% 34% 44% 0 CY1997 CY1998 CY1999 CY2000 CY2001 CY2002 CY2003 CY2004 CY2005 CY2006 CY2007 CY2008 Emerging Markets Europe Japan/Korea North America South America CTG=Contribution to Growth
Global Production Winner & Losers by OEM Millions 16 14 12 2002CY 2008CY CAGR Winners: Hyundai, Toyota, Renault/Nissan, Honda Staying the Course: BMW, PSA, GM Losing Ground: DCX, Ford, VW 16% 14% 12% 10 8 6 4 2 GM+Fuji+ Fiat+GMDAT+Suzuki 10% 8% 6% 4% 2% 0 0% GM Toyota Ford DCX R/N VW Honda PSA Hyundai BMW CAGR=Compound Annual Growth Rate
Global Production Winner & Losers by Country Millions 14 12 10 2002CY 2008CY CAGR China reaches #4 by 2008, #3 by 2010 12% 10% 8% 8 6 Mass Market locations suffer from high cost stagnation and high competition 6% 4% CAGR % 4 2% 2 0% 0-2% U.S. Japan Germany China South Korea France Spain Canada Brazil UK Mexico CAGR=Compound Annual Growth Rate
Global Production By Global Segment (2002 vs. 2008) D-Segment CTG=Contribution to Growth Comp FF 8% E 4% Full FF 9% Other 2% A 6% B 18% Comp FF 7% E 4% Full FF 8% Other 1% A 5% CTG 2002-2008 19% B 22% 40% D 29% C 24% D 30% 46% C 23% Global Prod = 55.8 mil B-Segment Global Prod = 63.7 mil
Presentation Outline Who is CSM Worldwide? China s Evolving Global Position Beyond a Domestic Industry Global Scope is the Key Summary
$40 $35 $30 $25 $20 $15 GDP per Person $22,605 $32,869 $10 $5 $1,860 $910 $470 $0 $36392 US Income and Demographics Room for Domestic Market Growth 30 2001 US$ in 000's 20 10 Population Age Distributions U.S. China Thailand % of Population 0 China Thailand India Germany Japan Age 0-14 Age 15-19 Age 20-24 Age 25-29 Age 30-34 Age 35-39 Age 40-41 Age 45-49 Age 50-51 Age 55-59 Age 60-64 Age 65+ Source: U.S. Census Bureau (Source: The Economist)
China Domestic Light Vehicle Demand 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Dismantling of SOE and economic reforms (WTO) Focus on infrastructure as a precursor to auto growth Choice is key leading edge offerings from virtually every global OEM at lower real prices Eventual adoption on Westernstyle auto financing 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 10.4% CAGR 2000 2001 2002 2003 2004 2005 2006 2007 2008
Beyond a Domestic Industry Yesterday Top Five Platforms - 1997 Hongqi 7000 Series Thousands 250 200 Antiquated, older technology borrowed or discarded by the mass markets Concentration on a Domestic-focused industry with slow product cadence Exports centered on aftermarket components Market was government, fleet and commercial based 150 100 50 0 VW B4/B5 Suz TC/TY Toy G/M DCX FR R/N CV-L
Beyond a Domestic Industry Tomorrow Top Five Platforms - 2008 Thousands 800 700 600 500 Honda Accord 400 Global rationalization is key Higher economies of scale drive lower costs, better quality and more frequent cadence Export volumes driven by lower final costs 300 200 100 0 Suz TC/TY R/N B BJ1040 DCX FR PSA PF2
Beyond a Domestic Industry China s Transformation Major OEMs Platforms per Major OEM % of Output from Global Platforms Overall LV Production Volume 1997 9 1.8 41% 1.2 million 2008 13 5.5 78% 4.5 million Comments Emergence of Hyundai, Renault/ Nissan, Honda and GM to China Domestic China OEMs borrow designs and components to continue Expansion into new segments increases choice for consumers Inter-platform flexibility increases Volume per plant rises OEMs borrow global platforms and powertrains for domestic and export production Volume growth and global platform penetration leads to sourcing opportunities Focus on domestic market first rising incomes and suburbanization Feedagrowing domestic market Exports of vehicles begin as demand diversification and rationalization evolves
Toyota Volkswagen PSA Renault/Nissan China LV Production Winner & Losers 1,200 1,000 800 600 400 200 CY2002 CY2008 CAGR Thousands 0 DaimlerChrysler Ford General Motors Honda Hyundai Other CAGR=Compound Annual Growth Rate 75% 65% 55% 45% 35% 25% 15% 5% -5% GM+Fuji+ Fiat+GMDAT+Suzuki
China LV Production By OEM CY1997 Honda Hyundai PSA Renault/Nissan Toyota Major OEMs Minor OEMs CAGR 2002-2008 CY2002 Toyota, Renault/Nissan, PSA, Honda, Hyundai: 20% Major OEMs: 6% Minor OEMs: 5% CY2008 0 1 2 3 4 Millions CAGR=Compound Annual Growth Rate
Strong In High Volume Growth Segments CY1997 B-Segm ent C-Segment D-Segm ent %ofb,c&d 1997-73% 2002-69% CY2002 2008-75% CY2008 0 1 2 3 Millions
Key Segments Lead Production Growth CY1997 CY2002 CY2008 26.1% 10.9% 35.9% 30.5% 8.7% 30.0% 33.7% 19.0% 22.0% 0% 20% 40% 60% 80% 100% B-Segm ent C-Segm ent D-Segm ent
China Production: A Coastal Affair FAW-VW Beijing Jeep Beijing Hyundai FAW Chengdu Motor Co. þýüù þ üù üù úüù úü þúüù þ ü ÿþýüûúüù ý üù úü ü ûúü ú üúü Aeolus Automobile Co. þúü ÿþúüùþú Dongfeng Citroen Brilliance-BMW Jinbei-GM FAW-Toyota Yantai Bodyworks Shanghai VW Shanghai GM Changan Ford Changan Suzuki þ ù úüù þ þú üúü ÿ úü Dongnan Dongfeng Nissan Guangzhou Honda FAW Hainan Motor
Beyond a Domestic Industry Technology and economies of scale drive a global industry -not a domestic one Fewer Regional OEMs and Tier 1s Economies of scale with global components paramount both required Combination of export and domestic demand enables allows demand diversification and higher capacity utilization
Presentation Outline Who is CSM Worldwide? China s Evolving Global Position Beyond a Domestic Industry Global Scope is the Key Summary
High Volume Platforms Over 1 Million Units/Annum - 2008CY 2.2 2.0 Millions 1.8 2002CY 2008CY %of1m Platforms to Total 28% 38% # of Platforms over 1M/Year 5 15 1.6 1.4 1.2 1.0 VW PQ35 R/NB Fiat A-B R/NC FordC1 GM FS Truck PSA PF1 Toy 330N Ford CD1-3 PSA PF2 Hyun EF/MS Toy 300N GM EPSILON Honda CS Toy NBC
High Volume Platforms China s Growing Global Role - 2008CY 2.4 2.0 Global Other Global China % China Global Millions 1.6 1.2 0.8 0.4 0.0 VW PQ35 R/N B Fiat A-B R/N C Ford C1 GM FS Truck PSA PF1 Toy330N FordCD1-3 PSA PF2 Hyun EF/MS Toy 300N GM EPSILON Honda CS Toy NBC 12% 10% 8% 6% 4% 2% 0%
The China Sourcing Hypothesis Global Tier 1s and 2s gain traction in China building components for domestic source and export Vehicle sourcing in higher cost mass markets will actually benefit from low-cost Chinasourced components China s growth in component, powertrain and vehicle production has a combined focus domestic and export Concerns over future input prices and the formation of a strong Tier 3 & 4 infrastructure Export timeline runs from component to vehicle to raw material and services
Presentation Outline Who is CSM Worldwide? China s Evolving Global Position Beyond a Domestic Industry Global Scope is the Key Summary
Summary WhyChina&WhyNow? Market is coming of age, modernizing and achieving better economies of scale WTO implementation and declining trade barriers open new avenues Competition increases as quality, scale economies and access to markets improve Global rationalization is real! China is quickly emerging as an OE source for components and powertrains Through this decade China will emerge as a source for B and C-segment vehicles as well as tooling/machinery
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